From PRINT EDITION MicroCap Review Fall 2017 Issue

Tuesday, September 26, 2017

TSX Venture Exchange (TSXV) is an important driver of the Canadian economy, and a key element in Canada's innovation and venture capital ecosystem. TSXV is the “junior exchange” to Toronto Stock Exchange (TSX) and is part of the world’s most successful two-tiered exchange system. TSXV is a leading platform for venture stage capital formation, allowing companies to leverage a public listing to raise "public venture capital", use their share currency for acquisitions and employee incentives, and scale their business in the public arena. As businesses grow and mature as publicly-traded companies, they can “graduate” to the main board, TSX. In fact, in the past 16 years, there have been over 635 companies that have successfully graduated from TSXV to TSX.

2. What does the V in TSXV stand for? Explain

Venture - we are often referred to as simply the Venture Exchange and companies that raise capital on TSXV often describe this as raising “public venture capital”. TSXV’s unique eco-system has been built on facilitating venture stage capital formation and providing a platform for venture stage companies to list and build on that foundation.

3. How do the listing requirements differ from the Toronto Stock Exchange?

The listing requirements on TSXV are designed for early-stage companies. TSXV companies are fully-regulated and all companies must meet initial and ongoing rules set by TSXV and the Canadian securities regulators. BUT, these rules reflect the nature (and stage) of early-stage companies. As a result, the costs of being a public company on TSXV are not prohibitive, even for early-stage businesses. That’s why there are over 1,500 companies listed on TSXV today. Once listed, the Venture rule set is also designed to provide additional flexibility to Venture stage issuers, allowing them to finance more easily, use shares for acquisitions, scale or pivot their business as necessary.

4. What types of companies list on the Venture Exchange?

Historically, the resource sector has provided a foundation for both TSX and TSXV, but today, TSXV is a well-diversified exchange with companies from the technology/innovation, financial services, industrials, telecom/media, and natural resource sectors. A common theme for all of these companies is that they are looking to access capital (sometimes as little as a few million dollars, or sometimes over $100 million) to fund growth and acquisitions.

5. What are the benefits to US companies listing on the TSXV?

Companies from around the world look to TSX and TSXV every year to access growth capital and get liquidity. In particular, US companies “look North” for the following reasons:

- Access to Capital, early – U.S. issuers raised $2.7 billion in equity capital on TSX/TSXV in 2016. Importantly, US companies are able to go public in Canada sooner than they typically can in the US

- Efficient access to capital - rather than a prolonged VC due diligence process, listed issuers can raise money in weeks, or shorter through the bought deal mechanism because of continuous disclosure requirements ensuring prospective investors are "up to speed"

-- Differentiated deal structures: by raising capital from a broad group of public investors (instead of a handful of VCs), entrepreneurs find that they can often realize more favorable deal structures (eg: only common shares are issued, no liquidity preferences, etc.). In many cases, these terms can help entrepreneurs retain greater influence over the company's long-term growth strategy

- Good Visibility – A large analyst community covers small-cap companies listed on TSXV. This means that even early-stage companies can get capital markets profile and attention from investors locally and internationally

- Stay local, but raise money globally - US companies that want to go public on TSXV do not need to re-incorporate in Canada or move their head office to Canada. Simply put, US companies can stay put, while accessing capital from abroad

- Tailored & Flexible Listing Criteria – Listing requirements are tailored to companies at varying stages of growth. As a result, the cost of being a public company on TSXV is not prohibitive for early-stage businesses.

- Growth Support – TSXV-listed companies have the potential to graduate to the senior board, TSX, as they grow and mature

- Entrepreneur Friendly - entrepreneurs are able to build their boards with industry leaders, rotate shareholders as necessary through the exchange, communicate and scale according to their business plan, etc.

6. How can the TSXV help companies with capital formation and funding?

We believe that the public markets offer a unique value proposition and in some cases a better cost of capital for acquisitions while providing investors with some liquidity and the company with on-going access to capital. We also believe that the process of capital raising can be complicated (and sometime overwhelming) for entrepreneurs. So, we have dedicated teams in Canada, the US, Europe, the Middle East, and Asia that to work with companies and help guide them through the process of going public.